That news comes as people who max out their credit cards are increasingly having difficulty paying off their debt, according to a New York Fed report on the first quarter of the year. “About a third of balances associated with maxed-out borrowers have gone delinquent in the last year, compared to less than a quarter of balances per year before the pandemic,” researchers said in a recent blog post.

Beth Ann Bovino, chief economist at U.S. Bank, said households on average spend about 10 percent of their income on debt payments — but that for lower-income people, it’s more than 20 percent.

“Lower-income households felt the pain from the disease, which was higher inflation. And now they feel the pain from the cure, which is higher borrowing costs,” Bovino said.

Wealthier households, in contrast, are doing well, boosted by a buoyant stock market and higher yields on savings, and they continue to fuel the economy through spending.

That spills over into how consumers view the political economy. Despite nearly three years of low unemployment and steady wage growth — which dulls some of the pain of high debt costs — Americans have given President Joe Biden low marks on his performance when it comes to the economy. Inflation and the economy’s general health remain top priorities for many voters, and Biden’s approval rating among those with household incomes of less than $75,000 stood at just 31 percent as of last month, according to Reuters.

Markets reacted to the May Consumer Price Index report by boosting the probability that the central bank could cut rates in September — the rate-setting committee’s last meeting before the presidential election in November. But the Fed might move more gradually. As Wells Fargo Investment Institute pointed out prior to Wednesday morning’s release, investors have been overzealous in predicting rate cuts throughout the last year.

Of the Fed’s 19 policymakers, seven of them said only one rate cut would likely be appropriate this year, while eight projected that two cuts would be needed. Four projected that rates wouldn’t drop at all this year.

All of that means borrowing costs are likely to remain high for lower-earning consumers this year and into next, as the economy continues to be powered by those with more disposable income.

Fed Chair Jerome Powell acknowledged Wednesday that there are “increasing financial pressures” for poorer people but also underscored that they are suffering from higher costs.

“It is people, lower-income people, who are at the margins of the economy, who have the worst experience, who experience the most pain from inflation,” he told reporters at a press conference. “So it’s for those people — for all Americans but particularly for those people — we’re doing everything we can to bring inflation back down under control.”

He also pointed to solid growth in the economy more broadly and low unemployment.

The wealthy are continuing to spend on services like travel and leisure, which has masked underlying weaknesses in other parts of the economy. Meanwhile, lower-income households are starting to tighten their belts. Wells Fargo Investment Institute President Darrell Cronk told reporters on a call Tuesday that this kind of bifurcation in consumer spending across income levels often occurs late in an economic cycle.

“It’s like in ‘Rocky.’ Those high rates are body blows,” the institute’s senior global market strategist Sameer Samana said during the call. “They don’t show up as visibly as face shots,” but they’re just as damaging.

The cost of living is still pinching Americans as well, though inflation has slowed significantly since its highs in 2022. While overall price growth flatlined in May, shelter costs have risen 5.4 percent over the past year. Education and medical care costs also accelerated, although grocery prices have actually dropped modestly over the past few months.

High housing costs in particular have put a strain on lower-income and middle-class voters. Newer data suggests that rents have been cooling for months, but that can take a while to feed into official inflation numbers, since leases are often annual and data is collected from the same households every six months.

Higher rates themselves are also making it more expensive for first-time homeowners to buy.

Biden earlier this year proposed lowering housing costs by providing mortgage tax credits and eliminating title insurance on federally backed mortgages. But that can only help so much in a market where there simply isn’t enough supply of homes — a problem the administration has been also chipping at around the edges.

The president “has put forward bold plans to create more much-needed housing and tackle rising rents; Donald Trump’s Republican allies in Congress have done everything they can to keep rents high,” Biden campaign spokesperson Charles Lutvak said in a statement.

The contrasting effect that high rates have had on different income groups is clearly influencing how members of both parties have been tailoring their messaging. So far, neither one seems to have broken through.

Certain Democrats like Sen. Elizabeth Warren — ignoring the White House’s piety when it comes to the Fed’s independence — are amplifying calls on the Fed’s Powell to cut rates to preserve the labor market and boost investment in new housing. The Fed hasn’t budged.

Former President Donald Trump in Las Vegas floated a plan this week to eliminate taxes on tipped income for service employees, making a direct play for a working-class voter bloc that serves as the backbone of Nevada’s Democratic Party.

The powerful local culinary union was nonplussed.

“Some staffer somewhere did a good job suggesting to him that this would be a good way to split organized labor,” said Jim Manley, a Democratic strategist and a top aide to former Majority Leader Harry Reid of Nevada, adding: “If past is prologue, the rank and file is never gonna go for it.”

Workers’ fortunes, in the meantime, are tied to the Fed’s next steps. Powell has said that an unexpected weakening in the job market would push him to cut rates sooner; the central bank has mandates to pursue both price stability and maximum employment.

But he and his fellow policymakers are watching rising prices in labor-intensive service sectors, and Labor Department data last week showed wages were growing faster than expected, which could foreshadow further price increases.

Essentially, the Fed hopes that wage growth will cool but price growth will cool more, such that people are ultimately better off.

“It’s hard to tell somebody, ‘I don’t want to see wages climb higher,’” Bovino said. “We want to see wages in nominal terms soften, but real wages go up, because inflation is under control.”